Alcatel: Look For Higher Margins, Improved Balance Sheet, Says Nomura

By Teresa Rivas

Alcatel-Lucent’s (ALU) stock was up 0.5% in afternoon trading, thanks in part to a bullish note from Nomura.

Analyst Stuart Jeffrey maintained his Buy rating while increasing his target price from €2.80 to €3.90, writing that despite the stock’s 186% year-to-date gain, he sees further upside, as the market isn’t factoring in Alcatel’s ability to achieve a high-single digit margin and address concerns about its free cash flow.

We continue to consider it likely that Nokia (NOK) bids for Alcatel-Lucent’s wireless assets (as reported by Reuters, for example). The stock’s strong run into results means that it is likely vulnerable to a sell-off if numbers disappoint. However, we see no reason for Q3 to disappoint and believe that any weakness in the Q3 results is likely to prove short-term in nature.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.